Year: 2015

NYA, NYSE update. THIS IS IT (for now). and FTSE

Hamilton

nya may 27 2015NYA june 21 2015

The usual then, May 27th, and now charts of the NYSE. This is one of the many “wedges that we identified over the past few months. Unlike the Nasdaq, which still has the possibility of going slightly higher, this wedge is so clean, tidy and perfect that we would be very surprised if the top was not already in. We remain open to the notion that the entire structure from the October low is a wedge. Alternatively it is not impossible to assume a large triangle followed by a wedge. In both cases the structure is complete.

    Furthermore it is not that hard to see an initial 5 wave leg down followed by an a-b-c corrective wave 2. I cannot get charts in sufficient detail to properly make that determination with a lot of confidence. Nevertheless it does not require a leap of faith and in the overall context of this index it is reasonable to conclude, at least for the NYSE, that the bear market started on the 21 of May 2015 at 11254.87. The RSI and MACD appear to be in agreement.

There are other wedges like this that are equally clear. The FTSE is another index that is identical to this one but has already come down much faster. Both traded just a few days ago at levels they were at more than a year ago! The FTSE actually two years ago.

FTSE june 21 2015

ABX update

Hamilton

ABX june 19 2015 ca babx june 19 2015 us b

These charts are both of ABX. On the left as measured in Canadian dollars and on the right the same thing except in US dollars. The consequences of the differences between the two can have a substantial impact on the count in EW terms that one would come up with. Things like overlap, where the top is, staying in the channel are all different depending on the currency. This is a philosophical issue that I am sure will never be answered, primarily because EW is simple discarded out of hand by some or followed with the fanaticism of myopic cultists by others. I don’t have the answer but in this case I would prefer using the US$ chart as gold is measured in US$, ABX’s operations are in the States and they report in dollars. Put in other words, the chart on the right is free from currency distortions. So is the detailed one below;

 

ABX june 19 2015 s

Our best guess here is that the entire correction took the form of a double zig-zag, i.e. an a-b-c X a-b-c. It is fairly symmetric and already well outside the channel. From the lows of about US$10 we appear to have either a wave 1 followed by an a-b-c wave 2, or a series of 1-2. In both cases the stock should go up. The XAU, HUI and CEF fund all have triangles that they should return to. None has done so so far.

Nasdaq update

Hamilton

nasdaq june 18 2015

Back on April the 24th it looked like the Nasdaq would peak in the next week or two. It did not. The explanation is quite simple that the wave 4 became a triangle and as a consequence spent an inordinate amount of time going sideways. We show a model of a diagonal which is essentially a 3-3-3-3-3 5-wave structure that often does not have alternation between waves 2 and 4. It is therefore impossible to anticipate a triangle and in the interest of the bigger picture, that is the rather violent return to the base, it is much preferable to err on the side of caution by choosing the earliest possible date. This time that proved to be wrong as we did get a triangle and that consumed an additional two months, at least in the Nasdaq.

Yesterday Yellen played the Greenspan game by saying nothing and taking a long time to do it. After thinking it through the market decided that that was good for another 78 Nasdaq points today for an all-time intraday high. The upper trend-line of this wedge, which has a total of six points on it may get it’s seventh point at around 5300.

For trading purposes all this doesn’t matter all that much as the ultimate goal is the base, so the gain simple gets bigger as this goes higher without appreciable greater risk. The QQQ may peak at around  113 or so and then a Dec. put with a strike at around 100 should be available for less than $2. It is bound to be worth a multiple of that by December.

VRX, Valeant update

Hamilton

 VRX june 17 2015

At around $170 this looked like a sell to us. It got to $308 so obviously we were off by about 1/2. Today we again think this is a sell. There are, arguable, 5 waves into the top and now the 5th wave is actually larger than wave one and three combined which is very unusual. The stock has traded up almost vertically and even left a gap behind between $220 to $240. For comparison purposes we include the US pharma+ ETF IBB which itself is a stellar performer but no match for VRX. This is one of those situation where things are “too good to be true”, perhaps because this is the only stock in this sector in Canada, there are no alternatives, except, of course, not playing at all.